UAA Director and Professor of Economics Dr. Gunnar Knapp gave a presentation this morning to the Senate Finance Committee regarding tapping the Permanent Fund reserves to fund state government.
He says the biggest impact of continued large deficits in Alaska’s budget is uncertainty.
Knapp: “If people are uncertain about where the state’s going, who leaves? Your best employees leave, the best people say, ‘I can do better elsewhere because I’m uncertain about what my future is here.’ If resource industries are uncertain, they think ‘Do I want to come to Alaska? They don’t have their fiscal act together, I may invest here and the next thing I know is I’ll be hit with a tax.'”
As for tapping the Permanent Fund, Dr. Knapp says Alaskans must balance their desire for diminished dividends or new taxes.
Knapp: “Probably what’s best for minimizing economic impacts is not to fully close the entire deficit this year, to take $3.5 billion out of the economy through spending cuts, taxes, and dividend cuts. But I also think it is certainly not running another huge deficit this year.”
He says from the data he’s reviewed, the state cannot balance the budget without new revenues from taxes.